'Progress' seen by ministers at NAFTA talks, but breakthrough elusive

WASHINGTON -- Canadian, Mexican and U.S. officials hailed progress on revamping the North American Free Trade Agreement (NAFTA) on Tuesday as efforts focused on crafting new rules for the auto sector, but there was no sign of a major breakthrough.

Canadian Foreign Minister Chrystia Freeland, U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo are meeting in Washington in search of a deal on reworking NAFTA after talks began last August.

Hopes for a deal hinge substantially on the three countries' ability to update rules for the automotive sector, the central plank of the Trump administration's push to make changes to NAFTA that bring more jobs and investment to the United States.

After a brief meeting with Lighthizer, Freeland told reporters she had held "good, constructive" talks with the U.S. team and that discussions focused on auto rules of origin.

"We are definitely making progress. I am not going to predict the day, hour and minute that we will be finished. We are certainly very, very hard at work, negotiators from all three sides," she said.

U.S. President Donald Trump initiated the talks to retool the 1990s-era trade agreement, threatening to dump NAFTA if it cannot be changed to his satisfaction.

Trump blames NAFTA for causing U.S. manufacturing jobs to be moved to Mexico. The pact's supporters say the integration of North America has helped U.S. industry be more competitive.

Guajardo and Mexican Foreign Minister Luis Videgaray later met Lighthizer for talks, as did Jared Kushner, Trump's son-in-law and presidential adviser. Some two hours later, Kushner described the meeting as "very productive," while Videgaray said: "We're making progress, but we're not there yet."

Earlier on Tuesday, Freeland said that Canada was looking for a "good deal, not just any deal," on NAFTA and that her government would take the time required to reach that objective.

To do so, the three sides must narrow their differences on U.S. demands to overhaul rules for the auto sector.

Auto tussle

Mexico's automotive industry has described the latest U.S. plan, which includes raising North American auto content to 75 percent from the current 62.5 percent over a period of four years for light vehicles, as "not acceptable."

The U.S. proposal would also require that 40 percent of the value of light passenger vehicles and 45 percent for pickup trucks be built in areas with wages of $16 per hour or higher, which would create problems for lower-cost Mexico.

Mexico's government has said it would put forward its own plan for the industry this week, and Jerry Dias, president of Unifor, the Canadian union that includes auto workers, told reporters he believed the discussions on the Mexican proposals had already begun.

Luis de la Calle, a former Mexican trade official, said the U.S. proposals were "backward-looking" and aimed at traditional carmaking. They did not reflect how the industry increasingly relied on high-tech electronics, he told Mexican radio.

Moreover, Trump's ambition to push for a deal that favored the United States but not Canada and Mexico was "grotesque and unacceptable", he added.

High-level discussions over NAFTA have intensified since Lighthizer in early March floated the idea of agreeing a deal in principle in a matter of weeks. But there has been no clear sign of a conclusive breakthrough on the most contentious issues.

With a presidential election less than two months away in Mexico, time is running out to strike a quick deal.

Major differences remain between the three on several U.S. demands, including autos, the future of the pact's dispute-resolution mechanisms and a U.S. proposal for a sunset clause that could automatically kill the deal after five years.